The Hightower Report

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NEAR-TERM MARKET FUNDAMENTALS: After falling short of last week’s highs yesterday, November soybeans moved lower overnight. Traders said that a modest recovery in the dollar yesterday and follow through strength in the dollar overnight contributed to the stall in the rally in soybeans. Other contributing factors were said to be evening up ahead of Thursday’s big Crop Production report from the USDA along with a lower wheat market and an unchanged quality rating for the US soybean crop this week. The USDA’s Crop Progress report showed the good-to-excellent rating for soybeans at 66% as of Sunday, unchanged from last week and also unchanged from last year. The 10 year average good-to-excellent rating for this time of year is 59%. China’s soybean imports slowed in July to 4.95 million tonnes, down from the record import total in June of 6.2 million tonnes. However, despite the drop the July total is still the second largest monthly import total on record. Weather remains very hot in most soybean growing areas of the US, and this is expected to continue for the remainder of the week. Mid to upper 90s are expected in the central and southern tiers of the Midwest with low 90s expected in Most of Iowa, northern Illinois and northern Indiana. Temperatures are expected to be in the upper 90s in the Delta with 100 degree readings in northern Louisiana and southern Arkansas. The North China Plain needs rain and cooler temperatures would be welcome. Rain would also be welcome in central and western portions of the NE soybeans belt in China. August soybeans finished substantially lower yesterday, despite the fact that deliveries remain at zero for soybeans. The USDA announced a sale of 284,000 tonnes of soybeans to China yesterday for delivery during the 2010/11 crop marketing year. This week’s export inspections for soybeans were 7.131 million bushels, down from 10.659 million last week.

TODAY’S GUIDANCE: With weakness in other grains and outside markets today and the potential for negative news for Thursday’s reports, November soybeans could retreat to support back at 1015 or even 1005 over the near-term with 1029 1/2 as stiff resistance today. December meal support is back at 286.20. Soybean oil made new highs for the move yesterday and then retreated along with the rest of the soybean complex. Oil looks to remain the leader over the short term as soybeans and meal see liquidation pressure ahead of Thursday’s reports from the USDA. A lack of damage from the ongoing heat wave last week may divert attention back to the big South American supplies and next year’s projected jump in US ending stocks. However, if the USDA lowers China’s 2010/11 soybean production estimate on Thursday, or if this week’s heat is believed to be damaging the US soybean crop, this could be enough to generate renewed buying.

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NEAR-TERM MARKET FUNDAMENTALS: The set-back in wheat futures overnight helped to pressure the market as traders see wheat as the leader in the short-term. November soybeans jumped as much as 64 1/2 cents in just four trading sessions as some threatening weather for the crops in the south and a surge in wheat futures have helped support active fund buying. Talk of the overbought condition of the market and weather uncertainty were seen as limiting forces on the rally yesterday. The USDA reported a sale of 116,000 tonnes of soybeans for China (new crop) and 130,000 tonnes of US soybeans for unknown destination. Strong export demand has helped provide underlying support. The weekly crop conditions report showed that 66% of the soybean crop was rated good/excellent compared to 67% last week and 67% last year. The 10 year average for this time of year is 60%. Soybeans setting pods reached 53% as compared with 33% last year and 48% as the 5-year average. Crop progress this week depends on the location. Weather for Iowa, the northern half of Illinois and areas to the north look to get hit with “ring of fire” thunderstorms and temperatures in the 80′s and low 90′s. The hot and wet set-up looks favorable for crops in this region. However, rainfall looks low for the southern crops and temperatures are very high so crops in Arkansas, Missouri and the delta look to come under some stress. Tbis could lower yield potential for crops in the severe heat. St Louis looks over 100 today and Hutchison Kansas was a record high 109 yesterday. November soybeans closed slightly higher on the session yesterday but 19 1/2 cents from the early highs. Funds were active buyers early to support the market, but long liquidation selling emerged on the early rally and there was a lack of much commercial buying interest as the market drifted lower for much of the session. Talk of rain in Iowa yesterday and rain in the forecast for the delta for later this week helped to pressure the market off of the highs as hot and wet weather is seen as mixed to generally positive for the developing crop. Traders said that a sharply higher crude oil market along with ideas that China’s economic growth could accelerate were supportive to soy oil. This may be particularly supportive to oil since China remains in a trade war with Argentina that is switching soybean oil export business to the US. This week’s export inspections for soybeans were 5.9 million bushels, down from 7.1 million last week. Total inspections to-date stand at 95.6% of the USDA’s projection for 2009/10 versus the 5-year average of 93.9%. Inspections need to average 13.2 million bushels each week to reach the USDA’s projection.

TODAY’S GUIDANCE: Weakness in the face of another new low for the US dollar and strength in energy market suggests the market is in an overbought condition. The weather outlook is mixed to supportive for the short-term but the eastern Corn Belt looks cooler for the 6-10 day outlook. The southern mid-west/delta region weather is threatening to yield but some scattered rains could hit the region later this week. The psychology is turning more supportive but the market is overbought short-term.

TODAY’S MARKET IDEAS: The upside break-out left 1025 1/4 as upside objective for November soybeans and this target was hit before the weak close yesterday. Look for resistance today at the 1009 3/4 to 1013 1/2 zone with support back at 987 and 974. The reversal in December meal leaves 283.80 as short-term target. December soyoil buying support is 40.44 with 42.57 as next target.

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NEAR-TERM MARKET FUNDAMENTALS: Several factors suggest that the soybean market could struggle to add much more premium over the short-term including a less threatening weather outlook, news of a slowdown in unloading grain shipments in China and news of a much larger than expected net long position from fund traders in the COT reports. At the port in Dalian China an explosion at an oil pipeline has caused the closing of 80-90% of the shipping berths including iron ore and Agricultural imports. South Korea is tendering to buy 25,000 tonnes of non-GMO soybeans. Argentina crush in May jumped to 4 million tonnes, up 11% from last year. The market continues to find support from fears of stressful weather during the sensitive pod-setting period for US soybeans in early August. Traders are also concerned with the potential sharp drop in production of higher oil-yielding crops in Canada and Europe and from concerns for the sunseed crops in Russia. November soybeans posted a new high for the move early on Friday only to close lower on the session. The market ran out of buyers on the early advance and November soybeans pushed lower on the day before firming into the close. This came amid firmer bids for cash soybeans at the Gulf which traders said was in response to strong demand. While China is still a strong importer, spot basis levels in the US fell 10-15 cents in many locations due to increased producer selling. Evening up ahead of the weekend was considered a major feature on the day with some light to moderate activity in the old crop/new crop soybean spreads with old crop gaining on new crop on the day. Some forecasts call for hot and dry weather to last through the end of July and into early August, which was considered supportive on a day marked by profit taking. The weather forecast to start this week is far less of a concern for the soybean crop as the crop can do well in a hot and wet environment as compared with concerns for a hot and dry week ahead. The northern Corn Belt cools down for a few days and then temperatures jump back to the mid-90′s later this week. The ridge moves across the country in the next few weeks but there appears to be plenty of rains for the delta and southern half of the Corn Belt to see the potential for improving crop conditions ahead. Traders see a 1-2% decline in crop ratings tonight. The Commitments of Traders Futures and Options report as of July 13th for Soybeans showed Non-Commercial traders were net long 59,789 contracts, an increase of 58,094 contracts. Commodity Index traders held a net long position of 175,212 contracts, an increase of 5,932 contracts for the week. For meal, Non-Commercial traders were net long 60,185 contracts, an increase of 12,212 for the week. The Nonreportable traders were net long 15,102 contracts, an increase of 2,997 contracts for the week and this pushed the Non-Commercial and Nonreportable combined traders net long position to 75,287 contracts, up 15,209 contracts for the week. For Soybean Oil, Non-Commercial traders were net short 18,108 contracts, a decrease of 18,174 contracts for the week. The Nonreportable traders were net long 263 contracts, an increase of 7,367 contracts on the week. Commodity Index traders held a net long position of 104,171 contracts. This represents a decrease of 2,077 contracts in the net long position held by these traders.

TODAY’S GUIDANCE: A much wetter forecast for the drier areas of the US along with the COT report which showed aggressive buying and a hefty net long position from fund traders are forces which could pressure the soybean market over the near-term. Farmer selling is on the rise and prices are favorable and unless the rains in the forecast for the coming week do not materialize, the market may be close to a near-term peak. Some traders think there is too much rain in the forecast but crop conditions are likely to improve this week and next week if the weather comes in as expected to start this week.

TODAY’S MARKET IDEAS: Trend-following fund traders were aggressive net buyers of 57,660 contracts for the week to shift to a net long position of 34,057 contracts which is higher than expected. Selling resistance for November soybeans comes in at 986 1/2 with key resistance at 993 3/4. Look for set-back to at least 955 early this week. December oil support is back at 38.40. December meal looks vulnerable to a set-back to near 278.60 with selling resistance today at 289.20.

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NEAR-TERM MARKET FUNDAMENTALS: There is a positive tilt to outside markets and a jump in corn prices overnight helped boost soybean futures as well. Hefty rains in Iowa over the weekend were seen as beneficial to crop development but much of the southern Corn Belt and parts of the northern delta have not seen much rain in the past week with high temperatures in the east starting to provide some underlying support. Rain over the past few days in drier areas of northeast China is seen as a negative development for the market. India monsoons have also help boost oilseed production prospects. Argentina officials plan to raise the minimum blending requirement for bio-fuels in gasoline and diesel to 7% and are considering moving to a 10% mix soon. The current mix is at 5%. November soybeans rallied early on Friday but eased late in the session to close just 1/4 of a cent higher on the day. Corn/soybean spread action was active last week in the wake of Tuesday’s bullish corn reports from the USDA. Support came from a lower dollar through early afternoon, but this was contrasted with erosion in crude oil prices on Friday. Weather forecasts were also in some conflict late last week. Traders see good weather for crop development this week but there is significant heat in the forecast for next week and this may have helped provide some underlying support. The Commitments of Traders reports as of June 29th showed Non-Commercial traders were net long 15,731 contracts, a decrease of 9,184 contracts for the week and the selling trend is seen as a short-term negative force. Commodity Index traders held a net long position of 170,909 contracts in soybeans, down 544 contracts for the week. For meal, Non-Commercial traders were net long 52,513 contracts which was up 3,988 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 65,037 contracts. In oil, Non-Commercial traders were net short 29,124 contracts, an increase of 18,707 contracts for the week and the selling trend is seen as a short-term negative force for the market. Commodity Index traders held a net long position of 110,526 contracts, down 3,037 contracts for the week.

TODAY’S GUIDANCE: While old crop ending stocks could tighten considerably in the July Supply/demand report for release on Friday, the market still faces a higher yield potential for the new crop and also face a sharply higher supply of soybeans and products from South America which could cause US usage numbers to slip in the next quarter. China crops appear to be improving and the turn higher in corn prices seems to be the main positive force for the soybean complex. A burdensome supply outlook with normal weather suggests soybean bulls “need” a significant weather issue in late July or August to disrupt yield potential.

TODAY’S MARKET IDEAS: A recovery bounce based on corn or positive outside markets appears to be a selling opportunity. Selling resistance for November soybeans comes in at 914 1/4 and 920 1/2 with 887 and 864 as next downside targets. December meal selling resistance is at 264.60 with 249.70 as next target.

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NEAR-TERM MARKET FUNDAMENTALS: The market took direction from a bearish weather forecast to move sharply lower yesterday and pull some of the weather premium out. A relatively dry forecast for next week has helped relieve fears of ponding and yield loss from too much rain as traders see the first week of dry weather as a reason to suspect improving crop conditions. November soybeans pushed to the lowest level since June 14th even though export sales news was positive and monthly crush numbers were slightly above expectations. Soy oil followed soybeans lower while meal saw mixed results into early afternoon. Oil was pressured from increasing stocks. Some forecasters have added moisture in the Midwest on Sunday and Monday and again later next week, but the 6-10 day is still dry and a little cooler for the eastern half of the Midwest and Delta. Weekly export sales for soybeans were 308,300 tonnes for the current marketing year as compared with 53,200 tonnes needed each week to reach the USDA projection. Soybean oil sales were 45,500 tonnes as compared with 8,900 tonnes needed each week to reach the USDA projection for the year. China was 35,000 tonnes of the total. Cumulative export sales have reached 90.9% of the USDA projection for the season as compared with 66.8% as the 5-year average for this time of the year. The Census Bureau May crush total was 133.8 million bushels which slightly above expectations. Cumulative crush for the season has reached 78.5% of the total USDA forecast for the season as compared with 76.6% last year and 76.2% as the 5-year average after 9 months of the marketing year. The data suggests that both exports and crush could be revised higher in the next supply/demand report.

TODAY’S GUIDANCE: The market will need to see a significant yield threat on the horizon in order to expect any tightness in supply for the 2010/2011 season. World ending stocks look to swell to a record high level and US ending stocks will shift from relatively tight stocks of 185 million bushels this year (138 million last year) to a whopping 443 million bushels if yield comes in the same as last year. If there is a supply issue which might emerge to support, the continued buying from China of US soybean oil and the sharp loss in canola crops in Canada are factors which might support oil relative to meal.

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NEAR-TERM MARKET FUNDAMENTALS: The market appears somewhat concerned with the potential threat of heat in the southern US growing areas and too much rain in the north to finish plantings and this has helped to provide underlying support. In addition, a major loss of planted acres in Canada due to excessive rains for the planting season helped support the market and supported canola and oat prices this week with talk that canola plantings in Canada could be down 2-3 million acres. The rally in soybeans attracted selling pressure from traders who believe that the US weather is not too threatening with crop conditions already very good and critical weather for the crop not due until late July and into August. November soybeans rallied to the highest level since May 17th into the start of the day session yesterday but prices retreated into early afternoon, trading lower on the day prior to the close. Meal also turned lower during the second half of the session, with the July contract posting a sharp loss on the spread versus July soy oil. July meal also lost ground to the new crop December meal on the sell off. Traders said that a lower dollar helped spark the early rally along with a 2% drop in the good-to-excellent rating for the overall US soybean crop on Monday afternoon’s weekly update from the USDA. Crop conditions may be most vulnerable in the Delta according to one analyst who noted that dry spots are emerging and very hot temperatures are in the long term forecasts. The 6-14 day forecast models from the National Weather Service show above normal temperatures which are centered in southern Illinois by the end of the period. Heat looks to build into the weekend and into the middle of next week.

TODAY’S GUIDANCE: The heat in the forecast is not a negative force for crop conditions as long as there is plenty of moisture. This suggests that Midwest crops will do well with a week or so of hot weather but crops in the delta and far southern Midwest may see some stress. Last weeks USDA supply and demand report pegged 2010/11 soybean ending stocks at 360 million bushels with a yield of 42.9 bushels per acre. “If” weather turns poor and bad enough to pull the yield down to the same level of the 2008/09 crop (39.7 bushels per acre) it could take 2010/11 ending stocks from a somewhat burdensome outlook to just 112 million bushels with a stocks/usage of just 3.6%. Again, this will take a period of poor weather into the late July period but given the market action which suggests old crop supply is not as high as advertised and given the huge net short position of fund traders, we can not rule out the market building some weather premium in the weeks ahead.

TODAY’S MARKET IDEAS: The weak close yesterday pulls short-term support back to 911 1/2 for November soybeans with 925 and 936 3/4 as resistance areas.

A bumper grain harvest is making its way to market. Terry Roggensack, founding principal, The Hightower Report tells BNN the road ahead may be rocky.

http://watch.bnn.ca/market-morning/june-2010/market-morning-june-8-2010/#clip311022

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NEAR-TERM MARKET FUNDAMENTALS: A combination of bearish outside market forces and the outlook for a good start to the soybean crop in the US combined with more rumors that China is canceling or trying to move foreword import cargoes was enough to pressure the soybean market on Friday. July soybeans erased Thursday’s gains and then some on Friday amid a broad sell off in financial and commodity markets. Slower than expected export sales news for soybeans and good weather were seen as other forces to pressure the market. Traders see the threat of some hotter weather into the US Midwest next week but after good rains over the weekend at many Midwest locations and the forecast for hefty rain totals this week, many traders see warm and dry weather for a few days as a plus for the crop outlook and yield outlook for the season. The market will see the first weekly crop conditions report for soybeans this afternoon. The House approved a bill last week which will extend the US $1-per-gallon bio-diesel credit and traders will wait and see if the bill passes the Senate. The National biodiesel Board believes that the industry is now running at near 15% capacity since the credit was dropped January 1st. Soyoil used to produce bio-diesel in April reached just 130.065 million pounds which is still well short of the 2009 monthly high of 245.6 million pounds, the 2008 monthly high of 300.5 million and the 2007 high of 376.2 million pounds in August of that year. The Commitments of Traders Futures and Options report as of June 1st for Soybeans showed non-commercial-no CIT traders (trend-following funds) were net short 26,147 contracts increasing their net short by 5,764 contracts for the week. Traders see the fund selling trend as a short-term negative force. Commodity Index traders held a net long position of 171,182 contracts. This represents a decrease of 1,584 contracts for the week. For meal, Non-Commercial traders were net long 28,476 contracts, an increase of 802 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 35,260 contracts, down 1,092 contracts for the week. In oil, non-commercial-no CIT traders (trend-following funds) were net short 25,122 contracts which was down 10,867 contracts for the week. This is seen as a sign of short-covering from trend-following fund traders and the buying is seen by many traders as a short-term positive force. Commodity Index traders held a net long position of 106,258 contracts. This represents a decrease of 2,402 contracts in the net long position held by these traders.

TODAY’S GUIDANCE: Rumors are that China may have canceled more than 10 shipments of South American soybeans and two shipments of US soybeans due to burdensome supply at China ports, lower crush margins in China and the lack of storage at ports. The surge higher in the US dollar recently is also seen as a potential negative force and this has been led by weakness in the Euro. About 9% of the US exports go to Europe. The market faces a surge higher in South American soybean supply for the months ahead and a decent start to the US crop. This could slow demand for US meal and soybeans on the world market. The delegation from Argentina in China has reported a lack of progress in their efforts to resolve the trade issues on soybean oil. And there is talk that China is preparing to hold off on Argentina imports for the rest of the year and China may also shy away from Argentina soybeans. Eventually, if the dispute is not settled this could be a supportive force. Unconfirmed reports of China canceling US soybeans plus more rain in the forecast in the US this week is a bearish set-up.

TODAY’S MARKET IDEAS: Selling resistance for November soybeans comes in at 904 1/4 with some light support at 893. A move under the May lows counts to 881 3/4 as next downside objective. Resistance for December meal comes in at 253.90 with 245.20 as next objective.

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NEAR-TERM MARKET FUNDAMENTALS: A turn up in the stock market late yesterday and a rally in energy markets along with some weakness in the US dollar was enough to spark strong gains in soybeans and products overnight but traders see the upside limited by a favorable weather forecast and a continued flow of new crop soybeans from South America. While investor confidence in commodity markets may be a bit more stable, many traders see the supply fundamentals as a reason to suspect that investors will shy away from soybeans over the near-term. Mostly dry weather this week with only scattered light rain in the forecast into early next week appears to be near ideal weather to see an aggressive plantings pace and a good start to the crop which was already planted. The collapse in livestock prices in the US does not provide confidence in feed demand and has meal traders a bit nervous. Taiwan bought 58,000 tonnes of soybeans from Brazil. Egypt is tendering for 15,000-20,000 tonnes of soybean oil and the same amount for sunoil. Basis levels for soybeans at the gulf were steady yesterday with talk of slow producer selling. There is also less talk in cash circles about any switching of US and South American cargo bookings. A backdrop of sharply lower crude oil and equities and a sharply higher dollar combined with favorable crop weather helped drive the market lower yesterday. The favorable crop weather in the US is reinforcing ideas that this year’s US soybean yields could be higher than the USDA’s current projection of 42.9 bushels per acre. Last year’s US soybean yield was 44.0 bushels per acre under, cool, wet and nearly ideal conditions. One analyst noted that the cooler forecast for the coming weekend and into next week and the possibility of improved rainfall later next week was particularly favorable in that it would keep the current hot and relatively dry spell from lasting long enough to cause stress to recently planted soybean fields.

TODAY’S GUIDANCE: The lack of bearish outside market forces could allow for a short-term bounce in the market but it will likely take a significant weather threat to see much follow-through to the upside. Ideas that China buying in soybeans might slow in the next few months and a surge higher in available supply from South America are seen as bearish forces. Dry weather in the US this week could cause producers to plant even more soybean acreage that anticipated. Keep in mind, if we see a 1 bu/acre increase in yield from last year, soybean ending stocks could increase to near 525 million bushels from 190 million this year and 138 million last year.

TODAY’S MARKET IDEAS: Rallies would appear to be selling opportunities. Downtrend channel selling resistance for November soybeans comes in at 914 1/4 today with 883 and 875 as next downside objectives. Selling resistance for July soybeans is at 945 3/4 with 895 1/2 as next downside objective.